Facing My Financial Fears: Investment Risk

This week, The Simple Dollar is doing a five part series on financial topics that scare me just a bit. Researching and then writing about them will (hopefully) alleviate some of that fear Other fears include buying a car, estate planning, and Roth IRAs.

My fear of financial risk goes back to the stock market crash of 1929 and the subsequent bank collapses of the early 1930s. My grandfather was a young entrepreneur in the late 1920s who held almost all of his assets in either stocks or in a local bank; between 1929 and 1931, he lost everything he had. After that, he did all of his savings in large glass jars.

This rubbed off on me as a child. I would watch him keep money in jars all over the place on his property and when I would ask him why he didn’t put it in a bank, I would get a very angry old man railing about how banks stole all of his hard-earned money and that they’re all crooked.

I eventually started a savings account at a local bank, but before I did I insisted on a copy of the FDIC guarantee on the account and, for almost my entire life, I’ve either held my money in my hands or kept it in that bank.

This fear is really my grandfather’s fear, I guess; I worry that I will simply lose everything I have if I entrust it to others. Whenever I make a decision to move my money, I still do it with extreme care, checking the history of the bank and the insurance on the accounts. I now have savings at three different banks, though it took me a while to reach that point.

The next step was taking the risk of investing in a retirement plan. Even with 100% matching from my employer, I felt on some level that I was “giving away” money. I spent an entire day asking all sorts of questions to a financial planner (who apparently later indicated to others that perhaps I was a bit paranoid) before finally investing in a 403(b).

We’re not even talking about the risks of investing in the stock market, though once I was able to push through that first barrier, I began to slowly look at other types of investment as well.

I spent most of the last year carefully examining the possibilities of a mutual fund, thinking about it, weighing the multiple levels of risk (in my mind), and finally, I pushed past that fear. I opened a mutual fund account and made my first investment within the past week.

It was a major psychological hurdle for me to cross, but it is exhilirating to know that my money is now actually working for me instead of merely sitting somewhere, just reinforcing my fears.

Basically, you will probably lose money in the stock market at some point but I say learn from it and move on. In the long run, not investing will cost you a lot more money than sitting on the sidelines.

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